Indicate what components of GDP (if any) each of the following transactions would affect. Check all that apply. Transaction Consumption Investment Government Purchases Net Exports
1. Ford sells a Mustang from its inventory to the Martinez family.
2. Ford manufactures a Focus and adds it to its inventory.
3. Your parents pay an accountant to file their tax returns.
4. Uncle John orders 10 new computers for his finance business.
5. Aunt Polly buys a new air conditioner from a domestic manufacturer.
6. Texas hires public middle school teachers.
7. Your parents buy a bottle of French wine.
8. Uncle John receives a check from the federal government for unemployment insurance benefits.

Transactions and Components of GDP affected:

1. Ford sells a Mustang from its inventory to the Martinez family.

Consumption

2. Ford manufactures a Focus and adds it to its inventory.

Investment

3. Your parents pay an accountant to file their tax returns.

Consumption

4. Uncle John orders 10 new computers for his finance business.

Investment

5. Aunt Polly buys a new air conditioner from a domestic manufacturer.

Consumption

6. Texas hires public middle school teachers.

Government Purchase

7. Your parents buy a bottle of French wine.

Consumption and Net Exports

8. Uncle John receives a check from the federal government for unemployment insurance benefits.

None

Explanation:

a) Data:

Components of the GDP are:

Consumption: This GDP component refers to the spending made by households, not for houses.

Investment: This GDP component comprises spending on assets, not for immediate consumption but to generate future returns.

Government Purchases: This component refers to government spending for the maintenance of its services.

Net Exports: This is the difference between exports and imports of goods and services.

Note that the GDP (Gross Domestic Product) can be computed based on three main approaches: income, expenditure, and production output. These three approaches yield the same result.

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